The Frugal Fiduciary Blog

401k Fees: Are Traditional 401k Services Worth a Smaller Retirement Nest Egg?

Posted by Eric Droblyen on Nov 16, 2016

I have a confession – my company’s participant benefit statements are nothing special.  While they disclose all the requisite information, they are matter-of-fact and lack color graphics.  They’re also delivered electronically, not mailed.

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Topics: low cost 401(k) plan, 401k fees, small business 401k

Asset-Based 401k Admin Fees Are Unreasonable; Fiduciaries Should Avoid Them

Posted by Eric Droblyen on Oct 19, 2016

20 years ago, 401k plans were free. OK not really, but 401k providers used this lie a lot to sell 401k plans to small businesses that didn’t want to pay any out-of-pocket 401k fees. In truth, these plans paid “indirect” fees - like revenue sharing paid by mutual funds and/or wrap fees paid by insurance company variable annuities – to 401k providers based on a percentage of plan assets.   

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Topics: fiduciary, asset-based fees, 401k fees

John Oliver Should Be Upset; His Hancock 401k Fees Are Too High!

Posted by Eric Droblyen on Jun 29, 2016

Recently, John Oliver lambasted the 401k industry and his own 401k plan with John Hancock on his HBO show Last Week Tonight. If you haven’t seen this show segment, you should check it out now - it was educational as well as hilarious. John Oliver’s main beef with his company’s John Hancock 401k plan was its annual fees - 1.69% of plan assets + $24/participant – which he considered excessive.

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Topics: 401k fees, 401(k)

How to Evaluate 401k Provider Competence in 2 Easy Steps

Posted by Eric Droblyen on May 18, 2016

Competence is one of the three top attributes you should consider when shopping for a 401k provider.  Unfortunately, it’s also a difficult attribute to evaluate due to the highly-technical nature of 401k services.  I mean, can you evaluate and measure the quality of 401k nondiscrimination testing, government reporting, participant disclosures, or the accuracy of distribution processing?  Probably not.

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Topics: 401k fees

What’s the #1 Reason for 401k Lawsuits?  Overpriced or Superfluous 401k Services

Posted by Eric Droblyen on May 4, 2016

overpriced-401k-services.jpgIn my last blog, I wrote the key virtue of the DOL’s new fiduciary rule is that it aligns 401k plan sponsor and financial advisor interests. Once the rule is effective, all advisors will be obligated to act in the sole best interest of 401k participants just like 401k sponsors. Prior to the rule, some advisors could fleece 401k plans without consequences – which often left 401k sponsors personally liable for participant losses due to excessive advisor fees.

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Topics: 401k fees

Shopping For a 401k Plan Doesn’t Need To Be Overwhelming For Small Businesses; A Checklist Can Help

Posted by Eric Droblyen on Jan 27, 2016

In my experience, 401k providers are like snowflakes – no two are alike. Their services can vary dramatically in breadth, depth and price. This variability can make it difficult for small business 401k fiduciaries to select providers with services that match their plan’s needs at a reasonable price.

That’s a problem. 401k plans should not pay for superfluous services participants won’t use. Excess services can be expensive, dragging down participant returns unnecessarily. When this happens, personal liability for 401k fiduciaries can result.

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Topics: 401k fees, 401(k)

Understanding a 401k Plan’s Fiduciary Hierarchy Can Make It Easier for Employers To Meet Fiduciary Responsibilities

Posted by Eric Droblyen on Dec 16, 2015

Over the past decade, several high-profile 401k fee lawsuits and DOL efforts to implement a fiduciary standard for professional investment advice have put 401k fiduciary responsibility in the national spotlight.  This attention has done little to help employers understand and meet their 401k fiduciary responsibilities.  Most employers are still confused and risking personal liability if 401k fiduciary responsibilities are not met.  Understanding fiduciary roles and responsibilities is key to addressing the issue.

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Topics: fiduciary, 401k fees

401k Fiduciary Outsourcing: Does it Actually Increase an Employer’s Fiduciary Liability?

Posted by Eric Droblyen on Sep 9, 2015

Last month, the DOL held 4 days of hearings regarding its proposed fiduciary rule. During these hearings, service providers, industry groups and academics shared their thoughts regarding the DOL proposal. Some of the most colorful testimony was given by Don Trone, a man some people call the “Father of Fiduciary.”

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Topics: ERISA 3(21) Investment Advisor, 401k fees

Avoiding 401k Fiduciary Liability Doesn’t Need to Be Difficult; Simple “Best Practices” are the Key

Posted by Eric Droblyen on Aug 26, 2015

My favorite guiding principle is Occam’s razor, which Dictionary.com defines as “the maxim that assumptions introduced to explain a thing must not be multiplied beyond necessity.”  I don’t know many 401k professionals that value Occam’s razor as much as I do.  In fact, I think many actually favor overwrought and overly expensive solutions to 401k issues.  I guess this probably makes a lot of sense from a business standpoint.  After all, it’s easier to justify a higher fee for a complicated 401k solution than a simple one.

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Topics: fiduciary, 401k fees, 401(k)

VC-Backed 401k Startups: A Paradigm Shift or Flash in the Pan?

Posted by Eric Droblyen on Aug 12, 2015

This year, three Internet-based companies joined the retirement plan services industry – Honest Dollar, ForUsAll and Captain401.  These startups are noteworthy because they weren’t founded by career retirement plan professionals. Instead, they were founded by Silicon Valley entrepreneurs backed by Venture Capital (VC) investors. 

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Topics: 401k fees, 401(k)

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